Delaware LLC involved in international bribery scheme

The News Journal | by Karl Baker

A Chilean airline will pay two U.S. federal agencies $22 million in penalties for bribing union bosses in Argentina with the help of a Delaware company, authorities announced in a plea bargain last week.

In 2006, LAN Airlines paid $1.15 million to “labor union officials in exchange for the union agreeing to accept lower wages,” a statement from the U.S. Department of Justice said.

In order to conceal the “sham payment,” officials from LAN first transferred the money to their subsidiary, a Delaware-registered limited liability company, called Atlantic Aviation Investments LLC, according to a Securities and Exchange Commission statement.

Atlantic Aviation Investments (not affiliated with New Castle-based Atlantic Aviation) then transferred the funds to an adviser to the secretary of Argentina’s Ministry of Transportation, who bribed the airline union officials.

Those payments were intentionally misstated on the limited liability company’s financial documents, authorities said.

Atlantic Aviation Investments was incorporated in 2006 and registered by Corporation Service Co., at 2711 Centerville Road near Greenville.

LAN Airlines also has owned three other Delaware limited liability companies, according to an SEC document. They include Seagull Leasing LLC, Bluebird Leasing LLC and Lan Logistics Corp.

The company now operates as LATAM Airlines Group and flies to the United States, in addition to Latin America.

U.S. law prohibits American companies from bribing foreign officials under the Foreign Corrupt Practices Act.

Company officials continue to work with federal investigators on the case, the DOJ said.

In July, eight Delaware limited liability companies were named by federal prosecutors as part of a scheme to embezzle hundreds of millions of dollars from the Malaysian government with the help of a Hollywood producer who made the film “The Wolf of Wall Street.”

Delaware Chief Deputy Secretary of State Rick Geisenberger said in July that criminals do not see First State corporations as a preferred conduit for financial fraud.

Safeguards are in place, he said, to allow law enforcement to access contact information for officials within any Delaware limited liability company.

“The laws that we’ve passed over the last 10 years all go to creating a trail that law enforcement can follow,” Geisenberger said.

The South American bribery case occurred before those changes in the law.

But Rep. John Kowalko, D-Newark South, said high-profile cases of corruption linked to Delaware entities are harming the state’s image and more needs to be done. As a solution, he points to his bill sponsored in June that would prevent any person “identified by federal agencies as a threat to this country” from incorporating a company in Delaware.

“Only a few LLCs, with huge financial resources, are taking advantage of the system’s weaknesses,” he said in an email.

The bill has not been voted on in the House Judiciary Committee.

About a quarter of Delaware’s budget comes from fees paid by companies that have incorporated in the state.

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